By DANIEL TAUB
Staff Reporter
Last year’s $16.6 billion merger of SBC Communications Inc. with Pacific Telesis Group was heralded as a big deal the first merger of regional Bells, and at the time one of the largest corporate marriages ever.
But 16 months later, the impact on customer service remains unclear.
Company officials are quick to note that there have been reductions in the time it takes for installation and repair. Meanwhile, rates for phone lines and services are largely unchanged, although some large customers have renegotiated their contracts and received lower rates as a result.
Others aren’t so sure that customer service has improved, pointing to a number of complaints delivered to an office of the Public Utilities Commission.
Where the reality lies is of considerable significance, not only as it relates to SBC, but the growing number of telecommunications mergers around the country. Just last week, Bell Atlantic Corp. and GTE Corp. announced a $52.5 billion merger, and there are rumblings that more consolidation is possible.
As phone companies keep getting bigger, the question is, will they become better?
Thomas Calcagnini, a senior vice president at Dabney Flanigan LLC in West L.A, said SBC’s purchase of Pacific Telesis was intended to reduce the cost of doing business for the company, thus allowing it to use the extra money for network improvements and new services not rate decreases.
“The big benefit that they get from the merger is there are cost synergies you’re going to get in terms of back-office systems, things like that,” Calcagnini said. “Maybe there’s some network costs that go down, even in terms of purchasing power. That’s where you get a pretty substantial benefit. Obviously with the money saved on those kinds of things, there are other benefits that can flow through. They can allocate those dollars to improving customer service, upgrading the network.”
As of Sept. 1, the rate for all local toll calls will be reduced by 29 percent. That could save somewhere between $9 and $20 a month for small businesses, according to Steve Getzug, a spokesman for Pacific Bell, the SBC subsidiary that provides phone service in California.
Among officials of Pacific Bell, a unit of Pacific Telesis, the merger with SBC has had a positive effect on service including the addition of about 3,000 customer representatives. All told, Pacific Telesis’ workforce has gone from 48,330 at the end of 1996 to 53,500 at the end of last month.
“This merger has been very, very good for our customers, our employees and our shareholders,” said Carmen Nava, regional president for Pacific Bell.
But the Office of Ratepayer Advocates, a division of the California Public Utilities Commission, has sent a series of complaints against Pacific Bell to the commission. The complaints primarily focus on the company’s customer service practices after the merger, and were based on visits to a Pacific Bell customer service center by ORA officials in April and May.
ORA said in its June report that Pacific Bell does not adequately screen customers for eligibility for the Universal Lifeline Telephone Service, a reduced-rate phone service for low-income residents; uses misleading sales tactics for marketing optional calling features; and fails to let its customers know their full options for blocking those with “Caller ID” service from knowing their phone numbers.
“As ORA’s report details, these practices are systematic and a great deal of pressure is brought to bear on their service representatives to adhere to the practices,” ORA Director Elena Schmid wrote in a June letter to the commissioners. “Furthermore, it is of great concern to ORA that Pacific (Bell) has not yet moved to change any of these practices, despite ORA’s attempts to draw attention to and address these problems.”
Sharon Bogisich, secretary-treasurer of Telecommunications International Union Local 103, which represents Pacific Bell customer service workers, said that under the new ownership there has been a greater emphasis on sales over customer service.
“They’ve tried to turn us from service representatives to sales representatives,” said Bogisich. “Before the merger, it was basically service over sales.”
But Pacific Bell spokesman John Britton, who tracks regulatory issues in Sacramento, said the complaints of ORA and the union are not supported by similar concerns voiced by Pacific Bell customers themselves.
“We’re fielding 3.2 million calls a month,” Britton said. “No one knows the customers’ pulse better than us. Our customers are not telling us about this. They do not feel they are being abused or we are too aggressive.”
The issue is set to be heard before the PUC in early October.
The merger has also been good to SBC’s balance sheet. In the quarter ended June 30, the combined company had a net income of $966 million vs. a normalized net income of $808 million for the like year-earlier period. (The normalized net income does not include the $1.6 billion one-time charge SBC took in the second quarter of last year as a result of the Pacific Telesis purchase.)
But the thriving SBC might run into some roadblocks soon, as it seeks to acquire Chicago-based Ameritech Corp. for $55 billion. Already, a group of Congressional Democrats from California and consumer-rights advocates have sought to oppose that merger, partially because of the ORA complaints about Pacific Bell.
